Emerging Markets

Some people just go to the grocery store and buy food. Others read the labels to make sure that what they're getting has the ingredients they're looking for. When it comes to mutual funds, however, labels can be a bit deceiving, and they can change. The results can leave an investor queasy. It may be a bit hard to follow - and there's no question that the story is a bit technical - but one indication of this is that many experts expect South Korea this week to be moved from the ranks of "emerging markets" into the higher ground of "developed nation."

NEW YORK -- Bear Stearns Cos., rocked by the collapse of two hedge funds in the subprime mortgage crisis, said yesterday that its third-quarter profit plunged 61 percent, hitting the lowest level in five years and topping off a painful summer for the Wall Street brokerage. Bear's bearish news stood in sharp contrast to a superlative performance by Goldman Sachs Group Inc., which posted a 79 percent rise in fiscal third-quarter profit, led by strong results in its investment banking, currency and commodities divisions.

Energy may be a wild ride for investors, but it could be the vehicle of choice. Even swooning credit and stock markets can't overshadow $70-a-barrel crude prices or emerging markets that can't seem to consume enough oil. Only a global recession could potentially modify the scenario. In the quest for more oil and natural gas, the giant drilling companies lead the way. For example, Diamond Offshore Drilling Inc., with 43 drilling rigs operating in the United States and internationally, has seen its stock price soar this year.

Your emerging-market fund might have climbed 50 percent during the past 12 months, but that doesn't mean it will be immune from the interest rate worries, housing woes and subprime mortgage angst that have tainted U.S. stocks recently. Asia, Africa and Eastern Europe might seem a long distance from the "for-sale" signs in your neighborhood and Wall Street's jitters over subprime mortgage fallout, but many analysts say they are not. The low interest rates and easy loan terms that caused Americans to speculate on homes the past few years also drove an investment boom in the far corners of the globe.

An opportunity to buy emerging-market stocks is likely to surface within a few weeks as nervous investors continue to flee from risky stocks, experts say. But analysts are warning investors not to be too eager to overindulge now. With emerging markets down about 10 percent, analysts say it would not be surprising for the stocks to tumble another 10 percent or 15 percent. Long term, they are confident that emerging markets - developing areas of the world in Europe, Africa, Latin America, the Middle East and Asia - will be among the world's most profitable investments.

If you like the ease of index investing, you would think investing throughout the world would be a snap. Instead of worrying whether you had too much or too little exposure to developed countries or emerging countries, you'd pick one index for the entire world and be done with it. That single fund would give you everything you needed - one investment that would allow you to partake in the world economy. But international investing has been more complicated than that. Unlike the U.S., where you can invest in the Dow Jones Wilshire 5000 index or MSCI Broad U.S. Market index and have the full array of U.S. stocks in one mutual fund or exchange-traded fund, international investing with indexes doesn't allow one-stop shopping.

Tricia Eileen Kissinger and Matthew Lion Nemeth were married last evening at the Metropolitan Building in Long Island City. The Rev. Vernon C. Nichols, a Unitarian Universalist minister affiliated with the Church Center at the United Nations, presided over the ceremony. The bride, 31, is a senior financial analyst in the Emerging Markets Group at the Federal Reserve Bank of New York. She graduated summa cum laude from Franklin & Marshall College where she was elected to the Phi Beta Kappa Society.

What's wrong with cash? Not a thing. If you can't stomach the market's recent plunge, you could move a little money into a high-yielding savings account or money-market fund temporarily and earn close to 5 percent. In fact, some institutions are higher. EverBank of Jacksonville, Fla., offers high-interest checking accounts over the Internet with a 5.5 percent three-month teaser rate, then 3 percent to 4 percent later, depending on the amount kept in the account. Parking money at rates approaching the 5.9 percent historical average on long-term U.S. Treasury bonds certainly has appeal now. Virtually every type of investment, from gold to stocks and bonds, has been pummeled since early May. Gold futures are down about 20 percent, the Dow has lost more than 5 percent, and the average international fund has bled about 13 percent.

I'm a psychologist and know I'm way behind in saving for retirement, so I can't afford to lose anything in my 401(k). When I read about international stocks crashing, I looked at my 401(k) and saw that my Dodge & Cox International fund had lost $5,000. Should I pull my money out right away? I have about 40 percent of everything I have in it. -- C.C., Chicago It's true that international stocks have been getting battered lately, but that doesn't mean all foreign stocks. Nor does it mean you should dump everything you have invested outside the United States, especially not the Dodge & Cox International fund.

Mike Conelius, manager of the Emerging Markets Bond Fund at T. Rowe Price Group Inc., beat rivals last year by investing in countries such as Lebanon and Serbia. This year he has his sights set on Iraq. "Whether that's being contrarian or just having higher convictions, I don't know," Conelius, 41, said yesterday. Conelius, who's been covering emerging markets for 16 years, first bought Iraqi debt in June 2005. Iraqi debt offers the second-highest yields in the world among dollar-denominated bonds behind Ecuador, because of the higher perceived risk that the government might default.